A634.3.5.RB - The Harder They Fall

I can share some insights on dilemmas that happen in society, work and in my life.

I have worked for Boeing for about 18 years now and I also worked for Lockheed Martin for 9 years. Boeing headquartered in Chicago is the world’s largest aerospace company. Several conflicts of interest, ethics, leadership and organizational problems rocked the aerospace giant about twelve years ago. Lockheed Martin is the world's largest defense contractor and is headquartered in Bethesda, Maryland.

 

In 2003, Boeing was sued by competitor Lockheed Martin, for having proprietary rocket launch documents belonging to Lockheed Martin. Several Boeing employees (who were former Lockheed Martin employees) were fired and received prison terms. The Pentagon cancelled contracts worth over $1 billion awarded to Boeing and the company was also banned from bidding on future rocket launch defense contracts in July 2003. In 2005, the two year ban and penalty was lifted by the Air Force. (Boeing, 2015)         

           

In 2003, Mike Sears, CFO, and Darlene Druyun, Vice-President and Deputy General Manager of the Missile Defense Systems unit, were fired and both received prison terms – he for four months and she for nine. She sought and received a $250,000 a year job at Boeing while she was working as an Air Force procurement officer at the Pentagon. She and Mike Sears negotiated her position along with a $22 billion contract to supply the US Air Force with (100) 767 refueling tankers. Congress later cancelled the contract after the scandal was disclosed and went public. (Boeing, 2015)

 

In December 2003, the board of Boeing announced that it had accepted the resignation of Chairman and CEO, Philip Condit. Condit stated, “Accountability begins at the top”.  (Anonymous, 2005)   

 

The tanker program competition was reopened for re-evaluation and proposals to all airframe manufacturers including European Airbus. After an intense review and evaluation for several years, the 767 was selected as the winner.  

         

Harry Stonecipher, former Boeing vice chairman and COO, who also headed McDonnell Douglas when it merged with Boeing in 1997, was brought out of retirement to run Boeing. Stonecipher soon restored credibility to the aerospace giant along with increasing market valuation by over 50%. He also promoted corporate ethics as a top priority. However, it was then disclosed that Stonecipher was having an extramarital affair with a female company executive. The board ordered him to stop but he refused. He was then asked by the board to resign. The relationship violated Boeing’s code of conduct which ironically Stonecipher implemented and all employees must sign once a year. His “poor judgment… impaired his ability to lead.” "His downfall was that he failed to practice what he preached. ” (Ached & O’Donnell, 2005)              

           

Not only did these scandals shake Boeing as far as jobs, contracts and reputation but the Pentagon and Congress as well. There were several changes for the Air Force leadership too. In 2004, Air Force Secretary James Roche and Assistant Secretary for Acquisition (chief weapons buyer) Marvin Sambur resigned because of the Boeing tanker scandal and public embarrassment of the procurement strategy. Congress lead by Senator John McCain (R-Arizona) highly criticized the scandal along with the Pentagon procurement strategy and how the deal came together. Secretary of Defense Donald Rumsfeld put the tanker deal on hold and promised to revamp the procurement process with major changes. Congress and several US government agencies including the Justice Department investigated the scandal. McCain stated, “The chapter on the tanker lease proposal cannot be closed until all the stewards of taxpayer funds who committed wrongdoing are held accountable.” (Wolf, 2004)      

Lockheed Martin had multiple bribery and fraud scandals along with financial contributions made by officials of the US aerospace company from the late 1950s to the 1970s in the process of negotiating the sale of aircraft.

According to Ben Rich, former director of Lockheed's Skunk Works:

"Lockheed executives admitted paying millions in bribes over more than a decade to the Dutch (Prince Bernhard, husband of Queen Juliana, in particular), to key Japanese and West German politicians, to Italian officials and generals, and to other highly placed figures from Hong Kong to Saudi Arabia, in order to get them to buy our airplanes. Kelly (Clarence "Kelly" Johnson, first team leader of the Lockheed Skunk Works) was so sickened by these revelations that he had almost quit, even though the top Lockheed management implicated in the scandal resigned in disgrace." (Rich and Janos, 1994)

The scandal caused considerable political controversy in West Germany, Italy, the Netherlands and Japan. In the U.S. the scandal nearly led to the corporation's downfall, as it was already struggling due to the commercial failure of the L-1011 TriStar airliner. (Rich and Janos, 1994)

So, what is the root cause of all these examples? It is greed, self-interest and focus on oneself along with human nature and ego. And these examples do not demonstrate leadership in fact just the opposite. What is the fix? Ethics training, ethics curriculum and code of conduct and most importantly leadership by example. And regulation monitoring too, e.g., the Foreign Corrupt Practices Act which makes it illegal for American persons and organizations to bribe foreign government officials and the Sarbanes-Oxley Act.  

References

Ached, Byron & O’Donnell, Jane (2005, March 7). Extramarital affair topples Boeing CEO.         USA Today – Money. Retrieved

            http://www.usatoday.com/money/industries/manufacturing/2005-03-07-boeing-     stonecipher_x.htm

 

Anonymous (2005, May 25). Boeing Under Phil Condit. Retrieved            

            http://icmr.icfai.org/casestudies/catalogue/Business%20Strategy2/BSTR098.htm

Ariely, Dr. Dan: Beware Conflicts of Interest (TED Talks: Ideas worth spreading). Retrieved       from http://www.ted.com/talks/dan_ariely_beware_conflicts_of_interest.html    

Boeing (2015). Available http://www.boeing.com/

Kramer, R. M. (2003).The Harder They Fall. Harvard Business Review, 81(10), 58-66.

Rich, Ben and Janos, Leo (1994). Skunk Works. United States of America: Little,             Brown, &        Company (Canada) Limited.

Wolf, Jim. U.S. Air Force top weapons buyer quits. Reuters. Wed Nov 17, 2004.